Singapore REITs ride to 5-year yield high amid market jitters

SINGAPORE/BENGALURU: Dividend yields at the top Singapore-listed property trusts are at their highest in at least five years, a glittering attraction as global investors seek refuge from the slump in oil prices and jitters over China’s weakest economic prospects in 25 years.

A Thomson Reuters analysis of 14 real estate investment trusts (REITs), using comparable month-end data available for the last five years, shows the median dividend yield was 6.7 percent at end-January – the highest since at least April 2011. The end-January spread between that yield and Singapore’s 10-year government bond yield was also at its highest in that period, at 4.4 percentage points.

The yield trend offers a timely reminder of the lingering allure of investments tied to brick and mortar such as REITs, which typically provide stable income streams, at a time when investors are on a knife-edge amid global market turmoil and fears about the health of banks and the broader economy.

“We believe current (REIT) valuations are attractive re-entry levels and believe that large caps (large-capitalisation trusts) are likely to benefit as investors turn yield-hungry in a tepid growth environment,” DBS analysts Derek Tan and Mervin Song said in a recent note.

Still, there may be clouds on the REIT horizon. Singapore trusts face a potential office and industrial space supply glut, while some prospective tenants may hold off on new leases in the short term, bothered by the same macro-economic concerns that are plaguing financial markets.

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